Q3 2025 Strata Critical Medical Earnings Call
Good morning, ladies and gentlemen, and welcome to the Strata Critical Medical fiscal third quarter 2025 earnings release conference call.
At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this call is being recorded.
I would now like to turn the conference call over to Matt Shriner, Vice President of Finance, Investor Relations, and CFO of Strata Keystone Profusion subsidiary. Matt, you may begin.
Thank you for standing by, and welcome to the Strata Critical Medical conference call and webcast for the quarter ended September 30, 2025.
We appreciate everyone joining us today.
Before we get started, I would like to remind you of the company's forward-looking statement and safe harbor language.
In this conference call that are not historical facts including statements about future time periods. May be deemed a constitute forward-looking statements within the meaning of the private Securities. Litigation Reform, Act of 1995.
These forward-looking statements are subject to risks and uncertainties.
An actual future result may differ materially from those expressed or implied by the forward-looking statements.
We refer you to our SEC filing, including our annual report on form. 10K filed with the SEC for a more detailed discussion of the risk factors that could cause these differences
Any forward-looking statements provided during this conference call are made only as of the date of this call.
Stated in our SEC filings strata disclaims, any intent, or obligation to update or revise these forward-looking statements except as required by law.
During today’s call, we will also discuss certain non-GAAP financial measures, which we believe may be useful in evaluating our financial performance.
A Reconciliation of the most directly historical comparable Consolidated, gaap Financial measures to those historical. Non-gaap Financial measures is provided in our earnings press release and investor presentation,
Our press release investor presentation and our form 10q and 10K filings are available on the investor relations section of our website at irada critical cam.
These non-gaap measures should not be considered in isolation or as substitute for financial results prepared in accordance with gaap.
Hosting today's call. Are our co-ceos will haburn and Melissa, Tom, Keel. I'll now turn the call over to Will.
Thank you, Matt, and good morning everyone. It's been a very exciting. Few months as we close to transformational transactions during the quarter, both with investigator of our passenger business and the acquisition of Keystone profusion setting us up incredibly well for long-term growth and value creation. We also rebranded the company in strata critical medical and changed our ticker symbols at SRTA to reflect our sharpened focus on Healthcare. I'm happy to report that strata is off to an exceptional start and Q3 year-over-year. Revenue growth accelerated to 29% excluding Keystone. Well, above of our expectation, for Mid teens Revenue, growth in the second half of the Year. This resulted in records segment adjusted ebita performance, which saw 80% year-over-year growth, excluding Keystone this quarter
This great profit Improvement was driven both by volume and significant improvements in aircraft performance as we emerge from a period of particularly heavy maintenance on our own Fleet, this resulted in a medical segment. Adjusted ebit that margin increased to over 15% in Q3 2025, excluding Keystone versus our 10.8% and the prior year period and 12.5% and the first half of this year
Our sequential growth in Q3 2025 versus Q2. 2025 is particularly impressive in the context of the seasonal. Sequential decline in Industry. Transplant volumes demonstrating the significant impact of Stratus continued market, share gains and our customers adoption of new services.
We're also encouraged by the positive free cash flow from continuing operations in the quarter and we expect to consistently generate free cash flow moving forward.
Before I walk through the financial results in more detail, I'll turn it over to Melissa.
Thank you, will. It's an honor to be here as co-ceo discussing this exceptional first quarter performance as strata
our integration of Keystone and our launch of strata's new Clinical Services Division is off to a fantastic start with these new capabilities. We are now truly an end-to-end organ, recovery platform, and the team is focused on tailoring solutions that deliver operational efficiencies and cost savings to the transplant Community. Broadly, starting with our existing customers
Our go to market strategy uses the same Playbook. We've employed successfully in our core Logistics business.
Locating resources closer to our customers.
We are co-locating staff and Equipment acquired through keyston near our existing Logistics hubs enabling us to offer all-in lower costs to deliver these services.
We are also rolling out new offerings to reduce the cost of DCd dry, run recovery. A consistent pain point for our customers.
A way to make the transplant process more cost-efficient for our customers. We hope it will enable centers to go after or organs that otherwise may not have been worth the time and expense increasing transplant volumes.
We continue to strategically focus on where the puck is going and Industry. Data shows, the market is heading in our Direction, industrywide NRP adoption rates. Continued to increase, during Q3 with transplants of organs that have undergone NRP approximately doubling versus the prior year. This is an encouraging validation of our strategy to increase exposure to the fastest growing sectors of the transplant ecosystem.
Further aligns. Our mission with that of our customers enabling more reliable and lower cost access to life-saving organs.
We've also seen great responses from our colleagues across the transplant industry. This is a particularly exciting quarter for our friends at organox. As they received FDA approval, to refuse livers with the Metro device. While in Flight we've already done the work to support our customers. Who choose to utilize this technology, all part of our device agnostic strategy.
We still believe that the customer is always right and we will always do everything we can to support the rapidly. Broadening set of life-saving Technologies driving growth in organ, transplant volumes,
With that, I'll turn it back over to Will.
Thanks Melissa. I'll now walk through the financial highlights from the quarter. All Financial results discuss during this call reflect continuing operations, only as the results of the passenger business have now been reclassified as discontinued operations for all periods.
Revenue, Rose 36.7% year-over-year to 49.3 million and 23 2025 excluding Keystone Revenue, increased 29% versus the prior year period.
Despite the sequential seasonal decline of industry-wide heart liver and lung transplants. In Q3 of approximately 6%, our Revenue increased 3% sequentially, excluding Keystone
organic Revenue growth in Q3 was driven, primarily by strengthening air Logistics where both new and existing customers contributed to the strong results in the quarter, we added 1 new Oppo air Logistics, customer late in Q3
I would also highlight that organ placement services revenue more than doubled year-over-year, albeit on a small base, as we continue to scale the business and acquire new customers during the quarter. We added one new organ placement customer.
Revenue growth can be noisy quarter to quarter, but our year-to-date growth rate, excluding Keystone of 15% reflects strong outperformance relative to the industry transplant volume growth of approximately 4%
Keystone, which closed on September 16th saw only a half month of Revenue contribution during the quarter for a 2.8 million impact.
For the full month of September, Keystone's revenue increased over 40% year-over-year.
To margins as expected, we saw a significant sequential Improvement in medical segment. Adjusted ebit on margins to 15.1% in 232025. Excluding Keystone versus 12.5% in the first half of the Year driven primarily by improved performance and our own Fleet.
Adjusted unallocated corporate expenses of 3.3 million in Q3 2025 are down approximately 40% from our run rate. Prior to the passenger, domestic reflecting our significantly reduced corporate overhead, as a purely medical focused business.
And this also came in ahead of our guidance for $3.5 million.
Turning to cash flow.
There's been a lot of noise this quarter given the unique transactions completed during the period and accounting that unfortunately is not particularly intuitive in our situation as that, we'll take a minute to walk through all the nuances, but we'll start with the most important point. We now, expect this business to be solidly free cash flow generative going forward. And if you cut through all the noise, this quarter, we generated approximately 2 million of free cash flow from continuing operations in the quarter and 2.7 million of free cash flow from continuing operations before aircraft. And
Acquisitions.
Now, we'll dive into the details.
Due to the unique nature of Keystone's capital structure, where employees participated in a phantom equity plan, a portion of the upfront consideration was paid to employees participating in this plan through Keystone's payroll system post-close. As a result of this structure, accounting rules required us to recognize $44.3 million of the Keystone purchase consideration in operating cash flow and investing. While the underlying total cash consideration from the Keystone transaction is unchanged, this accounting treatment resulted in a negative operating cash flow in the quarter.
From operations, a loss of $37.3 million was primarily driven by $44.3 million impacts from the Keystone acquisition consideration, mentioned above, and Joby transaction costs of $6 million. This was partially offset by operating cash flow from discontinued operations of approximately $8 million.
Capital expenditures, inclusive of capitalized software development costs, were $3.2 million for the quarter, driven primarily by capitalized aircraft maintenance of approximately $2.5 million and capitalized software development of $0.3 million.
We ended the quarter with no debt and approximately 76 million of cash and short-term Investments.
Before moving to the Outlook, there are a few quick housekeeping items to review. First, the Joby, transaction flows during the court,
As a reminder, the total value of the transaction was up to 125 million. Consisting of an 80 million upfront consideration and cash for stock 35 million and 2 separate earnouts, over a total of 18 months that can also be paid in cash, or stock and an Indemnity hold back of 10 million.
Joey chose to pay the $80 million upfront consideration in stock, and we monetized the shares during the quarter for cash proceeds of approximately $70 million.
The $10 million difference was driven by a significant decline in Joby’s stock price during both the pre-close VWAP measurement period, which determined the number of shares we received, and immediately after we received the shares. We have clear capital deployment priorities and took a market-neutral view as we liquidated the Joby shares.
Lastly we booked a legal provision during the quarter for ongoing litigation related to our go public transaction. That's been disclosed in our SEC filings over the last several years.
Moving now to the Outlook.
Due to the strong demand we saw in Q3, which continued in October, we are raising our 2025 revenue guidance range to $185 million to $195 million. We are also reaffirming the adjusted EBIT guidance range of $13 million to $14 million for 2025.
Medical segment. Adjusted ebit that margins are expected to rise. Sequentially in Q4 versus q3's 15.3%, primarily due to the mixed impact of the Keystone acquisition.
Adjusted on allocated corporate expenses or expected to be 3.5 million and Q4.
Finally, we are looking forward to Monday November 17th. When we are hosting our inaugural investor day at the NASDAQ Market site in New York City at 2 p.m., there has been considerable change at Strat over the last few months and we are excited to provide a deep dive of the business and share our plans for significant growth.
And value creation over the coming years. Leaders from across the business will participate in the event and will be on hand to answer questions afterward. We will also introduce our formal 2026 financial guidance and medium-term financial targets during the event. We hope you can join us next week for that. I'll turn it back over to the operator for Q&A.
Thank you so much, ANSI. Reminder to ask a question, simply press star 1, 1 on your telephone, and wait, for your name to be announced.
To remove yourself, press star 1 1 again.
Please stand by while we compile the Q&A roster.
Okay, 1 moment for 1 question.
It comes from the line of Ben Hur with Lake Street capitals.
Good morning, folks. Thanks for taking the questions.
You know, it sounds like everything's going quite well, and it's nice to see the guidance race here. Um, could you maybe provide a bit of a disaggregation of where the growth came from in terms of the revenue here during Q3 2025?
Sure happy to do that. Then thanks for being on the call. Uh look it was a pretty even mix of uh new customer acquisition. We continue to take market share and some strength within our existing customers. And some of that strength can also come from uh customers taking new services from us. We've broadened the suite of services, that that we offer. So very happy to see all of those things coming. Together for Revenue, growth with the far.
And maybe this is a question for, for the, uh, event next week. But do you see the the growth as, uh, coming in from similar?
Yeah, look, we continued to add new customers in the quarter as we talked about during the call. Uh and we see an equally attractive opportunity to consolidate market share in a very fragmented marketplace where we think our offering is significantly stronger. Just given our scale and our local service model. And then we also see a really attractive underlying industry growth trajectory where you have new technology and evolving regulations that are resulting in and really attractive growth, and that really attracted. Growth means more people get organs that need them, uh, ultimately resulting in and, and, uh, lives being saved. So, we think everything is aligned to create multiple ways for us to to achieve our growth objectives here. And we're really excited to talk about that and a lot more detail next week at our investor day.
Good looking forward to that. And then on the the heavy maintenance day, you you performed uh earlier this year across the fleet, you know, what should we expect in terms of Fleet margin that kind of the remainder of the year you know, downtime impact any, any moving pieces that change because of the maintenance schedule earlier the earlier this year
Hey Ben, this is Matt. Um, yes, so we did see scheduled maintenance events kind of come down to the third quarter that will continue into the fourth quarter. As we said on the call prepared remarks, we do expect margins to increase sequentially within the medical segment. So we are seeing that benefit, and we'll talk more next week about the margin expectations moving forward, but I think you see that improvement.
In the first half or the third quarter, what we're expecting in the fourth quarter, all kind of in line with how we've been talking about it over the last few quarters.
Great. And then, lastly, for me, you mentioned the, the relocation, uh, associate things associated with t stone, is that relatively dim Minimus. In terms of the expenses that that'll generate or, or, is that something that we should kind of factor in
Don't think it's anything. You need to factor it into the SG&A. Uh, it's just more about aligning our resources so that we're not flying people across the country when we don't have to, to deliver these services. So that's one of the big advantages here, is putting those things together.
Got it. Great. Well, thanks for taking the questions and congrats on, on the quarter. On the guidance.
Thanks Ben. Appreciate it.
Thank you. And as a reminder to our audience. If you do have a question simply press star 1, 1 to get in the queue
Our next question is from John Hickman. With Ladenburg Thalmann, please proceed?
Um, yeah, I don't know who's this question is for, but
And with keep, with the Keystone acquisition, could you give us a a sense of how many individual separate customers you are serving now.
So Keystone uh has a number of different business Lines. John we'll hear uh, you know, across both the cardiac care business and the transplant business. There's almost 250 different customers across the country. Uh so it's it's uh really great Geographic uh, diversity across the country and that's 1 of the reasons that we liked this model because the profusion that served those Cardiac Care. Customers could also be utilized to provide those NRP services that we provide to transplant center customers. So there's this really strong Foundation of trained Personnel that are based locally across the country. For the cardiac care business. They can then support
The transplant business as well. And we see a big opportunity to bring those valuable services to our. Mutual customer bases because there's only about 10% overlap of the transplant. Customers between the Legacy strata business and Keystone. So so, great opportunity there
So, is there any customer that's like...
I don't know 5% or more now.
Of revenues. Any 1? Customer that that's that's that large.
You know, we don't break out the the the customers on a, on a business line, by business line basis, but it's a it's a very Diversified business given that 250 customers for for the revenue base there.
Okay. And then could you elaborate? I.
I couldn't, um,
Right. At the end of the quarter.
Yes, on the logistics business, we added a new customer uh on the logistics side for uh, organ, procurement organization. And if you recall, John those contracts tend to be a little more focused on the ground than on the air, but they'll do a little bit of both, uh, and so excited to see that continued momentum for new customer acquisition. And, and a lot of that market share gain is what drove our outsized growth in this quarter uh, from customers, we added earlier in the year and then we also mentioned that we added a new customer for organ placement as well.
Okay, so as far as on the logistics side or the organ transplant side, so um,
You're saying you were very heavy on the air side, and Keystone had more ground services. Is that my recollection? Are you kind of evening out those two revenue sites now?
Or is are still.
Predominantly the larger part.
Are is still a much larger part of the business John uh, though. You're, you're correct in a sense that Keystone is weighted more towards some of the organ procurement organization customers which do, uh, they do have a lot of ground business that, that generates though keystones revenue is really generated by certain.
Recovery Services and in our piece services that they're providing to those customers. But it creates a ground opportunity for us uh to to provide the logistics to those underlying Keystone customers. But it it won't uh, create a material shift in the logistics business in terms of the waiting between air and ground.
Okay. And are you going to get to a point where you're going to break out?
The.
the two different, like, logistics versus...
Um, the profusion is side.
Yeah. So so uh if you look at our investor deck that we just posted this morning, you'll see that we've added a a breakout on a proforma 2025 basis of what the business mix is, assuming Keystone was acquired on January 1st of this year. So that's that's sort of the best indicator of what the go forward. Business mixes is likely to be, I would flag for you. That, you know, the the Keystone business is concentrated in some of these really fast, growing sub-sectors of the transplant industry. So we talked on the call about how it grew more than 40% year-over-year, uh, and and, and the month of September. So, you will see a little bit of shift towards those Services, because we do expect, for example, NRP to continue growing, as a percentage of the overall DCd recovery. So some of those underlying industry Dynamics, we'll talk about a lot of it and much more detail next week at the investor day.
Will result in some mixed shifts towards those services.
Okay. Uh, thanks, and uh, congratulations on the quarter again.
Thanks John.
Thank you so much.
And as I see no further questions in the queue, I will pass it back to Matt.
Great. So we got a few questions from investors directly and we're just going to address them now.
Um, so the first question is just a question about the seasonality that we saw in the third quarter. We're transplant volumes down mid-single digits. Well, why don't you take that one?
Sure, Matt uh you know this is something that we expected and we we've seen it in the industry volumes, the last 3 years or so. In a row uh at the end of the day, you know there's a a supply and availability of transplant surgeons factor that drives the amount of volumes that can that can take place in the industry. And just historically we've seen more vacations, more, unavailability surgeons and it does unfortunately, impact the volumes this year was, was no different. Uh, you know, there there could be some other factors that play on the year-over-year. Uh, there's always some some lumpiness as we like to say and the transplant volumes. But as you can see, given our market share growth our, our new, uh, offerings and expanded service lines were growing right through that seasonality, which is where we want to be.
Great, multiple ways to outgrow the industry.
We also got a question just you know, how how is uh the Keystone acquisition going so far? We closed about 7 8 weeks ago.
Melissa, why don't you handle that one?
The people that were thrilled to have joined us with Keystone surgical recovery and NRP capabilities. It truly makes us an end to end. Um, organ recovery platform. So the customers are really excited about having us as a 1 call option.
Great. Well, uh, we received a few other questions, but we're going to save those for the investor day next week. We're going to hand it back over to Carmen.
Thank you so much. And ladies and gentlemen, this concludes our conference, thank you for your participation and you may now disconnect